Risk Analysis
Multinational corporations (MNCs) face several international risks. It is crucial to reduce the risks for the business to thrive and become sustainable. The best strategy for any international corporation to reduce risks as they occur to avoid meetings more challenges associated with them (Teeboom, 2019). One of the most prominent risks that are faced by international corporations in carrying out international projects is the cultural risk. Failure of international corporations to properly assess can pose significant losses because of ineffectiveness. It is, therefore, important that international corporations involved in international projects critically consider the cultural risks that they are likely to face.
Project risk refers to the factors that are likely to affect how a project is carried out, its scope, time, cost, and quality in particular (Sennara & Hartman, 2002). Culture is the comprehensive programming of the mind of an individual that differentiates them from other people in a sing group or several groups. Culture is inheritable and can be transferred from one generation to another.. Cultural risk is the potential for an organization to enter into a struggle because of norms, customs, differences in language, or the preferences of customers. Cultural differences can pose serious problems even when the involved cultures are uniform. For any project that is carried internationally to be successful, cultural risks must be taken into consideration.
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Risks
Cultural risks are those factors that influence the behavior of a business or an individual. These factors can be found in almost all cultures, and it is essential to have a correct understanding of their nature to know how to mitigate them best. Most of these factors are cross-cultural. They include language, religion, social structure, and communication or language barriers.
Language
Worldwide, there are more than 3000 used languages, with over 1000 various tongues in active use. As a result, language is, therefore, crucial in determining the character of culture (Elmes, 2013). Multinational corporations must understand this, and in the dissemination of their projects, they must factor the fact that languages are varied and so their programs should be curated in such a manner as to fit and be appropriate to the target.
Religion
Religion can be defined as the relationship that exists between an individual and society. Society is always defined in terms of its religious and cultural norms. In most cultures, the economy is conceived in terms of religion (Carter, 2004). This means that religion may have a significant effect on how the economy of a particular area behaves.
Communication
Communication can be defined as how information is delivered from one area to another or between one individual to another. Communication differs widely from one culture to another. In some cultures, for instance, non –verbal communication (use of gestures) is prevalent and is more commonly used as opposed to physical interaction. To foreigners, this kind of communication can be confusing, and it may pose challenges for experts who would want to understand the language. Gestures differ from culture to culture, and one gesture in a particular culture can mean something completely different in another culture. High-context countries such as Japan, Arab countries, and China exhibit a high usage of gestures. On the other hand, for low-context countries, there is more usage of decoded speech (Verbal communication). The US, for example, and several other countries in the world widely uses verbal communication.
Verbal communication seems to be the main barrier to cultural communication because of the wide variety of tongues and languages that are in use in various countries in the world. The ay language varies from one culture to another, and how a particular culture uses signs (gestures) in communication can pose a significant disadvantage to individuals, something that can significantly hinder international business in rolling out crucial programs.
Cross-Cultural Risks
This risk is inherent in individuals using their own culture as a bass to judge or criticize other cultures. This risk may lead to partiality and inconsistencies in carrying out projects, whereby people may sideline or look down upon other cultures. This leads to the impact known as ethnocentric orientation (Cavusgil, 2008). This trend may lead to inconsistencies in behavior in society when some individuals feel that their culture is superior and more preferable to others using economy, ethnic groups, or religion.
Social Structure
Cultural differences themselves can make it difficult to define a way of collaboration for the diverse cultures of the world. For cultures to blend well to ensure business transactions become successful, collaboration must be ensured. It may be difficult for international corporations to determine the best way to collaborate on various cultures in a bid to roll out multiple programs or disseminate services or products.
Cultural risks can pose severe challenges for international corporations. International corporations must be at the forefront in mitigating these risks to operate smoothly. To control these risks, they should be eliminated immediately. This is the most successful and the most effective technique. Prevention of the occurrence of these identified risks will be the most effective way of controlling these risks.
References
Carter, J., (2004). Religion and culture: The individual and the community. Castle Rock Institute.
Cavusgil, S. T., Knight, G. A., & Riesenberger, J. R. (2008). International business: Strategy, management, and the new realities. Pearson Prentice Hall
Elmes, D., (2013). The relationship between language and culture . National Institute of Fitness and Sports in Kanoya International Exchange and Language Education Center. http://www.lib.nifs-k.ac.jp/nii/46-11.pdf
Sennara, M. & Hartman, F. T. (2002). Managing cultural risks on international projects. Paper presented at Project Management Institute Annual Seminars & Symposium, San Antonio, TX. Newtown Square, PA: Project Management Institute.
Teeboom, L. (2019, March 24). Managing Risks Associated With a Multinational Corporation. Chron. https://smallbusiness.chron.com/managing-risks-associated-multinational-corporation-78224.html
